APL Apollo Tubes Ltd. share price target

The outbreak of COVID-19 globally has affected the supply chains of most companies beginning late March. We expect most of the companies under our coverage in mid-cap space to report fall in sales on a YoY basis during Q4FY20 due to the weak environment and lockout in the month of March. Lower sales are also likely to impact margins due to negative operating leverage. Some companies including battery manufacturers, Castrol are expected to post strong margin contraction. However, the serious impact on sales and profitability is likely to be felt during Q1FY21 when the impact of lockdown will be very prominent....

APAT reported volume growth of 53%/32% YoY/QoQ on consolidated basis for Q3FY20 at 4.8lakh ton. Robust volume performance was aided by Apollo Tricoat (71% QoQ rise in volumes @ 47kt) alongside APAT's core products.

APL Apollo Tubes (APL) results were broadly in line with our expectations. Net sales increased 25.8% YoY to Rs20 bn mainly led by strong volume growth (+52.6% YoY to 0.5 mn tonnes) partially offset by lower realization (-17.5% YoY to Rs42,489/tonne) due to lower steel prices. EBITDA jumped 171% YoY to Rs1.6 bn as EBITDA/ tonne improved 77.6% YoY to Rs3,342. Net profit jumped nearly 4.7x YoY to Rs742 mn. The company...

Sales volumes stood at 480,225 MT up 52.6% YoY and 31.9% QoQ. Volumes increased on account of production efficiency, foray into new locations, increased branding expenditure, re-stocking at dealer end and improvement in demand scenario. The company is on track to surpass its volume guidance of 20+% growth. EBITDA/ton stood at Rs 3,342 up 77.6% YoY and 69% QoQ on account of improved...

APAT reported volume growth of 20% YoY on consolidated basis for Q2FY20 at 3.6lakh ton. We note, this a modest volume performance in a lean quarter (weak construction activity) aided by Hollow Sections (17% YoY growth)_ and contribution from Apollo Tricoat.

APL Apollo Tubes (APL) reported better than expected profitability for Q2FY20. Although EBITDA/tonne fell to Rs1,977 (-30.3% YoY, -38.5% QoQ), it was better than our forecast of Rs1,800. EBITDA fell 42.4% QoQ to Rs720 mn due to inventory loss as steel prices fell sharply (Rs5,000/tonne) during the quarter. There was a tax reversal of Rs341 mn vs. our estimate of Rs3 mn. Hence, net profit at Rs598 mn was significantly above our forecast. Cash flow from operations improved to Rs3 bn in H1FY20 compared...

APL Apollo Tubes (APAT) is the largest producer of Electric Resistance Welded (ERW) Steel Pipes and Sections in India with a manufacturing capacity of 2.55 mn MTPA. With pan India manufacturing capacities and extensive distribution network, they are able to cater to customers effectively and efficiently (95% of the revenues come from the dealer-distributor network). APAT has always been a pioneer in new technologies & innovative products which has helped it grow faster than its peers. They also invest continuously in enhancing brand awareness and develop the brand which in turn is creating entry barriers for new entrants....

APL Apollo Tubes (APAT) is the largest producer of Electric Resistance Welded (ERW) Steel Pipes and Sections in India with a manufacturing capacity of 2.55 mn MTPA. With pan India manufacturing capacities and extensive distribution network, they are able to cater to customers effectively and efficiently (95% of the revenues come from the dealer-distributor network). APAT has always been a pioneer in new technologies & innovative products which has helped it grow faster than its peers. They also invest continuously in enhancing brand awareness and develop the brand which in turn is creating entry barriers for new entrants....

We initiate coverage on APL Apollo Tubes (APL) with a BUY rating and a target price of Rs1,920. APL is India's largest manufacturer of Electric Resistance Welded (ERW) pipes. It is also one of the lowest cost producers of ERW pipes with wide range of products and a large distribution network. In the past decade, APL has outperformed industry growth by gaining market share from small and unorganized players. These factors have resulted in strong return ratios for APL (Average ROE of 19% over FY10-19). With expanded capacity in place, we expect its volumes to grow at a CAGR of 20% over FY19-21E. Also, its EBITDA/net profit are expected to grow at CAGR of 24%/45% over...

APAT reported a strong volume growth of 29% YoY on consolidated basis for Q1FY20 at 3.8lakh ton. We note that Hollow sections its core product (including DFT) offering reported 31% YoY growth at 219kt indicating growing acceptance of DFT, technologically superior product.